Originally published on ProfessionalAdviser
22nd April 2026
https://www.professionaladviser.com/opinion/4528351/understanding-sale-process-matters-secure-outcome
Roderic Rennison continues his series of columns for PA, this time sharing his insight on understanding the business sale process…
Once the terms of a sale have been agreed and set out in what are termed the heads of agreement, a seller might be forgiven for feeling that the most critical part of the sale process has been successfully achieved.
It has at one level but, the terms agreed will be subject to satisfactory due diligence, agreeing the legal aspects. This article delves into what to expect and also, importantly, the pitfalls to be aware of and to avoid or at least mitigate.
Due diligence will either be conducted by the acquirer or by specialist firms that it employs. It is important for the seller to understand what is involved and to allocate the time and resources to enable the data requested to be provided accurately and quickly, whilst at the same time ensuring that day-to-day activities can continue without disruption. Unfortunately, not all deals complete and the seller needs to factor in this possibility.
The diligence typically falls under three headings: compliance, financial, and legal. The compliance element is statistically most likely to identify issues if there are any, and so we actively advocate on behalf of our clients that it is completed first. It is sometimes referred to as “red line” diligence.
Where the seller has advised on a sizeable number of defined benefit transfers, high risk investments, or had issues with the Financial Conduct Authority, it is especially important to ensure that the data is complete and well presented. Arranging for this data to be reviewed by a specialist compliance consultant before the sale process starts is likely to be a sound business decision.
It is also important for the due diligence to be provided via a data room or other secure software, as it will need to be warranted as being complete and accurate as part of the ensuing legal agreement.
The due diligence process typically lasts between two and three months and sometimes longer, and it is the most stressful part of the sale process. For this reason, we recommend that our clients prepare appropriately and ensure that they have adequate resources in place. If there are significant delays in supplying data, this can and sometimes does cause irritation on the part of the acquirer, which can affect the outcome.
Whilst it is natural for the sellers not to want to tell their colleagues what is taking place until there is some certainty, there is often merit in involving the person responsible for operations so that they can assist. There should be a carefully thought process regarding when to communicate with the staff and not to make the decision only late in the process, as this can affect retention and the payment of deferred consideration.
Due diligence is not a one-way process where it is only the acquirer seeks information from the seller. The seller also has the right to conduct due diligence on the acquirer. Indeed, there should be an active process from the outset on the part of the seller to ask a consistent series of questions when talking to each potential acquirer in order to make an informed decision regarding the preferred acquirer. The input from professional advisers will help the seller ask relevant questions.
Agreements are commonly used for business sales, split into two main types: share purchase agreements (SPAs), where shares in the company are sold and asset purchase agreements, where the sale is of specific company assets, i.e. clients.
The main aspects of an agreement include:
A legally binding framework for both parties
The document details the price, payment terms, and obligations of both the buyer and seller
Agreements will include warranties, representations, and limitations of liability, which protect both the buyer and seller, and it is vital for sellers to understand the impact and their obligations
Most agreements will also contain restrictive covenants, which the sellers should fully understand
The fundamental point to understand is that the agreement between the acquirer and the seller supersedes all other agreement documents. If an aspect is not contained in the agreement, is not part of the sale and is not legally enforceable.
We strongly recommend that lawyers with in-depth experience of intermediary transactions are retained, as there are nuances and areas of detail which it is important to have detailed knowledge of.
The overriding need in this, the most challenging part of the sale process, is for sellers to be vigilant and focus on the details. One effective way of mitigating the risks that sellers face is for them to obtain professional advice. Going it alone can, and quite often does, increase the risk of an unsatisfactory outcome.
Feel free to email me at [email protected] if you have any questions, and my next article in the series will look at “life after sale.”
Roderic Rennison is a founding partner at Catalyst Partners